Exit Strategy

Trip-protection insurance is popular with airline passengers who worry that a change in plans could mean forfeiture of airfare, prepaid accommodations and other upfront travel costs. Many air charter customers could benefit even more from such coverage, due to the amount of money at stake. Charter operators typically assess cancellation penalties that escalate as departure times approach. Also, while “empty legs” are often offered at a steep discount, they are usually sold with a 100 percent cancellation penalty.

Unfortunately, few companies provide insurance for air charter, and those that do generally cover cancellation due to medical issues and natural disasters–not the main reason businesspeople typically cancel.

“Many individuals who travel by air charter are businesspeople,” noted Christine Buggy, director of marketing for Travelex Insurance Services in Omaha, Neb. “They may be concerned with having to cancel their trip due to business reasons.”

A division of London’s Travelex Group, Travelex offers two trip-protection plans that can provide some coverage in such cases. Travel Max–which will reimburse you 100 percent for up to $50,000 in lost prepayments for flights and other upfront expenses–covers cancellations for business reasons along with those due to medical emergencies, natural disasters and other risks that trip-protection policies routinely address. (You can increase coverage to $100,000 by special arrangement.) With Travel Select, which provides 100 percent reimbursement up to $25,000, you can add a “cancel for business reason” clause for $99 at the time of purchase. The insurance itself typically costs 7 to 10 percent of the amount being covered, with the price varying according to the age of the traveler(s).

The wrinkle in such coverage is that it excludes what likely are the most common reasons for zapping a business trip, such as a deal falling through or a schedule change. Instead, this insurance covers the costs of charter flights canceled because you or a traveling companion named in the policy have had your travel time rescinded because of, say, a boss’s orders or a business emergency. Collecting on the insurance requires a written, notarized statement by a company officer and/or the human resources department attesting that previously approved travel time has been revoked for a covered reason. If you’re self-employed, you must provide work schedule documentation that clearly identifies the cause of the cancellation.

Don’t count on maneuvering around these limitations, Buggy said. Travelex carefully investigates claims, and “any attempt to submit false documentation for can­cellation would be considered ­insurance fraud, which is a criminal offense.”

The Travel Max plan does also offer a cancel-for-any-reason clause that pays up to 75 percent of nonrefundable travel expenses and can be exercised up to 48 hours before the scheduled departure. This coverage costs an additional 50 percent above the base cost of the insurance for the trip.

While the Travelex plans seem like a step in the right direction, the situations excluded from coverage leave a huge gap in air charter trip protection. Also, these plans include insurance for risks that typically don’t apply to air charter: lost luggage, missed connections, and admission to airline club facilities in the event of delays. This means you’re paying for some coverage you don’t need.

Conversely, all-encompassing air charter trip insurance could stimulate more air charter business. Say an empty leg becomes available for a trip you’ve tentatively planned. You might be inclined to book it and lock in the low rate if you had cancellation protection, whereas you’d be more hesitant to take advantage of the fare if you stood to lose 100 percent of its cost if you had to cancel.

A new company, Jetsurance, has created trip-protection coverage designed exclusively for air charter travel, stripping out non-applicable risks and expanding covered contingencies. The Jackson Hole, Wyo. company, which opened for business in mid-2012, offers an “anytime for any reason” cancellation policy that provides an 80 percent refund for a premium of 10.5 to 12.5 percent of the charter cost. “If you wake up and just don’t feel like flying–for those people it’s great,” said Jetsurance founder and CEO Jeff Rambo.

Jetsurance also offers a Private Jet Travel Protection Plan. For a flat 7.7 percent of the total insured expense, the plan provides 100 percent reimbursement for cancellations due to more than a score of the most common reasons for scrubbing a charter flight, including sickness, injury, or death; inclement weather; a labor strike that disrupts flight services; natural disaster affecting one’s home; employment termination; or a subpoena requiring a court appearance. A $50,000 medical expense benefit and $500,000 evacuation coverage are included. Rambo said the National Union Fire Insurance Company, BCS Insurance Company, and Jefferson Insurance Company underwrite the policies, which can cover nonrefundable expenses including lodging and prepaid activities such as tours and heli-skiing. You can purchase policies online (jetsurance.com) or on the phone after booking a flight. Rambo is also targeting charter operators and brokers, hoping they’ll make cancellation protection part of their standard offerings.

Jetsurance has yet to establish a track record, but with the growing popularity of trip-protection insurance, perhaps air charter customers finally will be able to purchase coverage that’s well-suited to their travel mode.